Peugeot, Dongfeng announce small-car platform

JasonChow

French car maker PSA Peugeot Citroën and its Chinese partner Dongfeng Group said on Sunday they would invest EUR200 million ($216.1 million) to develop a new platform for both companies' next generation of small cars.

Cars based on the new platform, which will allow the two companies to share common parts during production, are expected to hit the market in 2019, Peugeot said. Europe's second-largest car company added in its statement that the common architecture will allow it to tap into Dongfeng's supplier base, which in turn will "make it possible to meet ambitious cost targets."

The investment, of which 60% will come from Peugeot, will also go toward a new joint research-and-development center. Peugeot said a team of Dongfeng engineers will be installed the French firm's main technical center in Vélizy-Villacoublay, France.

The move, announced at a news conference in Shanghai, signals a tightening relationship between the two companies. Dongfeng already owns 14% of Peugeot after it invested EUR800 million last year. Also, Peugeot sold more cars in China in 2014 than in its home country for the first time in its history.

"It has been exciting and rewarding," said Peugeot Chief Executive Carlos Tavares, referring to the first year of the partnership. "Our sales in China are quite significant and still growing so it's an important contribution" to the recovery of PSA.

He said the new platform is flexible and could create as many models as needed, but is targeted at the smaller-car segment, which he said is where the bulk of the market is.

"We have full confidence in the rejuvenation of PSA," said Dongfeng Group Chairman Xu Ping.

While Peugeot has made great strides in China, it still lags far behind other foreign makers like Germany's Volkswagen AG and Japan's Nissan Motor Co. Peugeot has only 4% market share with a limited range of cars, points out Phillipe Houchois, a car analyst at UBS. Moreover, Peugeot's three brands--the namesake flagship marque, Citroën and DS--aren't clearly differentiated in the Chinese market and lack recognition among consumers, he said.

Write to Jason Chow at jason.chow@wsj.com and Colum Murphy at colum.murphy@wsj.com

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